Carl Icahn Help or Hindrance? Looking at the Other Company (Not Netflix) in His Sights

To truck maker Oshkosh Corp.’s (OSK) beleaguered shareholders, the 50% share price gain that’s followed Carl Icahn’s interest in the company looks like a blessing indeed. But investors in this for the long-haul – perhaps those still hoping to recoup an early 2010, or pre-2008 share price – might want to hold their thanks to the great shareholder activist. Icahn’s involvement here could yet be a curse, just when things were finally getting better.

Icahn’s Oshkosh involvement has taken a back seat, in terms of public notice, to his very recent interest in Netflix (NFLX).

Icahn divulged a 9.5% stake in Oshkosh back in October 2011, one of more worrisome points in the company’s post recession history. Recovery for this $2.57 billion market cap company has been tortuously slow. Government defense spending usually accounts for more than half of Oshkosh sales, and that revenue was down some 39% for the fiscal year. Sales of everything else, from fire engines to garbage haulers and booms, were down too. It was no wonder that its share price had tanked, as seen in this stock chart.

Icahn contended the company was more valuable broken up and sold, but Oshkosh shareholders soundly rejected his slate of board candidates. Late last month, the board also rejected his $32.50 a share bid, and it adopted a poison pill plan to make a hostile takeover difficult.

Oshkosh contends shareholders will get better returns by cutting costs and capitalizing on an economic recovery expected to bring more demand for the non-defense products they sell. They’re particularly excited about the nascent recovery in the homebuilding sector, buyer of its cement trucks and the like, which already led to a 32% sales gain there.

The defense division, management contends, is made more valuable by investing in new products and expanding the customer base rather than selling it in a slump. Oshkosh makes niche military products, like vehicles that carry tanks, and its patented parts for such often give it a competitive edge. The company is spending in R&D and seeking contracts with foreign governments.

It’s impossible to know which plan will long-term be more shareholder-profitable, but it’s also unclear whether Icahn’s involvement now is a help or a hindrance to a return to a $40 share price. Of course, Icahn-induced takeover speculation helps, but that ride isn’t free. Oshkosh will spend millions fighting Icahn, and that’s money not spent on R&D, marketing and other things to strengthen the business.

That’s not so important if Icahn gets his way with the split-and-sell strategy. Investors in other companies, like biotech company Genzyme, have made oodles of money when Icahn did just that. But his involvement is by no means a guarantee of success. Dynegy, for example, filed for bankruptcy earlier this year after an Icahn intervention, as did Lear and Blockbuster in the past.

There’s always the possibility Icahn will lose interest in Oshkosh, as he has with numerous other companies, and that, too, might be a mixed blessing. Clorox (CLX), for example, held his attention as a break-up target for a few short months last year. Clorox’s share price was basically flat during his focus, which was decent performance considering the 12% decline in the S&P 500 over that period. Since he backed off in September, Clorox shares are up about 9%, or half of what the S&P 500 has delivered.